Implications of Efficient Risk Sharing without Commitment

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ID: 304867
1996
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Abstract
Consumption data generally indicates that consumption risk is not perfectly diversified across individuals. This paper considers if and when imperfect diversification is a feature of efficient allocations in a symmetric information environment without commitment. It shows that if individuals are sufficiently patient, imperfect diversification is always sub-optimal in the long run; however, if individuals are not so patient, imperfect diversification is always optimal. The paper goes on to demonstrate that the way that history matters in an efficient allocation in a symmetric-information/no-commitment environment can be used to distinguish lack of commitment from other possible rationalizations of imperfect risk sharing, such as efficiency in the presence of asymmetric information.
Reference Key
openalex_W2100037494 Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors Narayana Kocherlakota
Journal The Review of Economic Studies
Year 1996
DOI
10.2307/2297795
URL
https://doi.org/10.2307/2297795
Keywords Keywords not found

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